This really depends on the industry being examined. Some businesses are more labor intensive than others and will spend more on labor and benefits. The airline industry is labor intensive. I've had P&L responsibility for several individual businesses and business units in my career, but I have yet to see anyone spending anything remotely close to three times salary to cover benefits, however generous they may be. In my experience, benefits usually average about 35-40% of salary/wage expense. The companies I derived that average from all offered generous benefit packages.
The airline industry as a whole spends about 35% of revenue on salaries and benefits which represents about 75% of all non-fixed costs. This is why layoffs are always the first strategy for cutting costs in a downturn. Fuel is the second largest expense coming in at about 14-16% of revenue.
It's been a long time since I've been to business school so I can't be sure of what they are teaching these days. You can be assured however, that they are teaching students how to read financial statements and to understand operating expenses.
Benefit costs for our management staff (not the big, big kids) run about 34% annually. We're a comparatively large company with about 4,000 management personnel
It's always understood that personnel costs are the single larges controllable expense. That's why you do layoffs in bad times- Except when union agreements prevent you from reducing your personnel costs (see GM for an example of this problem). Generally it's easier to do without low-end people than accountants and other professionals, so the little guys get cut first.
But what else are you going to do? You can't stop paying the power bill or the rent or purchasing merchandise (or AV-gasoline as the case may be). You have to save money somewhere.
They teach touchy feely garbsge and group thinking from what i've observed of those coming out of the brain laundries.
I used to do a lot of work at the ABC studios and when Capitol Cities took over they fired all the managers and brought in younger groups to replace them and it almost put them in bankruptcy.
When the former managers who were given large severence packages were called and asked to save them they told them to shove it. They eventually picked out one person in each department that they thought could make a decision and fired the rest and that is the only thing that kept them from going under.
Horses designed by committees slways turn out to be camels!
I was an IT manager for a major Wall Street firm for near on 20 years, not an economist or accountant, but this should help explain what I mean:
One of the "hidden costs" of doing business for us (and every firm on the street) is that when we do business with, say, the State of New York (and we all do, lot's of bond issues, union funds, pension plans, etc), we're automatically tied to a pension contribution scheme by state law. The contribution is based upon age.
The younger a worker is, naturally, the smaller the required contribution. However, when the worker reaches 40 years of age (or older), the amount explodes exponentially.
For example, if I'm 39 this year, and I work for a firm that does business with NY State, then my pension liability to the firm is equal to a small percentage of my total salary (and is limited in terms of the dollar actual dollar amount. I believe this number is 3%). However, when I turn 40 the following year, my pension liability to the firm becomes an automatic, flat-rate 10k per year, and stays at that level for the length of the term of the contract with the State.
In other words, the cost of my pension to the firm, as a result of doing business with the state, costs them 10k a year until I either quit, die or retire.
Other states have similar contract requirements.
So, if I have a 40 year old, working at 50K a year, he's actually costing me 60K a year and that's BEFORE you add in the cost of insurance, retirement plan (401k) contributions (and administration), the 12% Social Security tax contribution, and providing things like days off and paid holidays or medical leave (also mandated by government).
This, of course, does not take into account things like stock option plans, bonuses, productivity lost to sick time, travel and education benefits.
The one serious (internal) study I ever saw on this subject came to the conclusion that an employee actually costs more in terms of total benefits package than salary, assuming the employee took advantage of every benefit available to them.
PS- almost forgot;
As for what they are teaching in business school, it's no longer sound economics. The best example would be the "X+Y=Z" theory (which is the basis for PeopleSoft and other 'management' tools.
The basis for this is that X number of workers, working Y number of hours per week, should produce Z units of work. This works fine in, say, industrial settings, but how do you apply this to other fields?
For example, I'm an IT manager. My people write programs. They attend meetings with other departments to co-ordinate the creation of new projects or merely to maintain what already exists. They spend a lot of time on the phone with vendors. They are routinely awoken at all hours of the night to take care of program issues (since we maintain 80 data centers around the planet, but still administer all of them from the United States). They work weekends and holidays because that's the only time we can get to make changes or repairs without interrupting daily business.
X=Y=Z doesn't exactly work for this does it? Yet, my company will spend $6 million this year in licensing fees to use this software. The MBA's say it's an effective tool (it's always about having more tools, isn't it?),and that's that. They sold management on it. AT the end of the day, they can point to a chart or a graph, which ALWAYS reflects the truth (/sarcasm). Numbers, after all, don't lie.
This is but one (small) example of this stupidity.